What is economics? It is a fascinating science that studies how production and distribution affect the economy and vice versa.
Are you wondering what economics is? It’s the scientific study of the economy. It analyzes the growth of (or lack thereof) the economy by studying the production, distribution, and consumption of goods and services habits of a nation.
The social science of economics can be broken down into two disciplines: microeconomics and macroeconomics.
What is Microeconomics?
Microeconomics (micro = small) often studies the part of the economy that deals with individual decisions. This means that micro economists analyze individual markets and businesses and how an individual like you and me spend money, and how this affects the entire economy.
In 2013, something wonderful happened to Canadians –we got Target. The department store spread up to Canada, bringing its elegant vibes with it. However, they only stayed in the true north for two years.
Why? Because their shelves were often empty due to bad supply chain management. Additionally, their prices weren’t that affordable compared to other Canadian staples. This led to many Canadians shopping elsewhere, and as a result, Target Canada closed down.
Its exit hurt the Canadian economy. From a micro aspect, it left thousands of people jobless and hundreds of department stores vacant for months.
Many former employees didn’t have an income, so they didn’t buy anything. They didn’t put much back into the economy. As for the buildings, they weren’t generating any capital or collecting taxes from customers by acting as a store. They just sat there doing nothing, as building owners paid the mortgage. They also weren’t providing any employment.
What is Macroeconomics?
Macroeconomics (macro = large), on the other hand, studies the financial system at the national level. Macroeconomists analyze the entire economy, whereas microeconomics studies the behaviours of the individual.
Some of the economic forces it looks at are inflation, price levels, economic growth, national income, gross domestic product (GDP), and unemployment rates.
So, looking back at Target’s exit, we can say that it affected the macroeconomy by lowering the employment rate in Canada.
However, since it is an American company, leaving Canada also affected the United States economy.
Target’s departure hurt the U.S.’ economic growth by obtaining capital losses. Since they didn’t make a profit, they paid less in taxes. Additionally, their economy would’ve grown quicker had Target remained in Canada and was doing well.
The profits (most of it anyway) would’ve been sent back to their parent company, which is located in the U.S. This means that the U.S. would’ve been obtaining some Canadian money.
Economics is a fascinating science. It is able to link an individual’s buying decision to the national economy. Think about that for a second. Whenever you buy a pack of gum, for instance, it is somehow affecting your country’s overall economy.
That’s some amusing stuff!
READ MORE? What is Psychology?
Is economics something you would want a better understanding of? If so, why? Share your thoughts in the comments below.